American Realty Capital swallows up CapLease

CapLease owns properties across the US from office buildings to distribution centres which will now add to American Realty Capital’s massive portfolio.
Photo: Bloomberg

by
Oshrat Carmie

New York
American Realty Capital Properties
will buy CapLease in a deal valued at $US2.2 billion, including debt, as it seeks to expand its holdings of ­single-tenant commercial properties.

American Realty agreed to pay $US8.50 a share for CapLease’s common stock, or about $US755 million, according to a regulatory filing on ­Tuesday from the New York-based real estate investment trust. That’s 20 per cent higher than the closing price of $US7.10 on May 24.
CapLease
preferred shares will be converted into the right to receive $25 a share in cash plus accrued dividends.

CapLease, based in New York, owns real estate across the US ranging from single-tenant office buildings to distribution centres. Its largest tenants include the United States government, Aon Corp and Kroger Co. The acquisition, which is expected to be completed in the third quarter, will add more than 70 properties to American Realty's port­folio, bringing its total to about 800.

“This transaction will further institutionalise the notion of durable, defensive dividends for our stockholders by allowing them to become owners on a very favourable basis of the third-largest net-lease REIT in the United States,"
Nicholas Schorsch
, chief executive officer of American Realty, said in a statement included in the filing.

Under net lease arrangements, a­ ­tenant pays most costs associated with operating the property, in addition to rent, minimising the owner’s expenses.

American Realty intends to assume about $US580 million of CapLease’s $1.2 billion in debt and repay the rest, according to the filing. The cost of paying the preferred shares and the ­balance of the debt is equal to about $879 million, said Anthony DeFazio, an American Realty spokesman with outside firm DDCworks.

The deal is expected to add about 11¢ a share to American Realty's adjusted funds from operations, and the REIT plans to increase its dividend by 3¢ a share. Almost all of CapLease’s senior management will join the new ­company.

“We believe the structure of this transaction creates the greatest value for all stockholders over both the near and long term," Paul McDowell, chief executive of CapLease said.

Related Quotes

Company Profile

The agreement allows CapLease to solicit alternative proposals from other parties between now and July 7. Until then, CapLease may terminate the deal at a fee of $15 million.

American Realty was spurned earlier this year in its bid to buy Cole Credit Property Trust III, an owner of more than 900 mostly single-tenant properties, in a transaction valued at about $US6.7 billion. Cole Credit instead purchased its management company, Cole Holdings Corp.